Blue Apron just revealed how expensive it is to help America cook

What’s inside the box?
What’s inside the box?
Image: Blue Apron
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Blue Apron has filed for an initial public offering. Founded in August 2012, the startup delivers pre-portioned ingredients and glossy recipe instructions to households across the US. It was valued at $2 billion during its last financing in June 2015.

The filing comes as many startups in the broader food delivery business are struggling to stay afloat. Maple, a New York startup that dreamed of delivering a better office lunch, shut down last month. Sprig, a gourmet meal delivery service in San Francisco, went out of business last week.

Blue Apron has tried to set itself apart from those other companies by tying its brand to the cooking experience. “We’re not an on-demand food product,” Blue Apron founder and CEO Matt Salzberg told Quartz in February 2016. “We’re helping people learn new ingredients, new techniques, new recipes. We’re helping them spend time in the kitchen with their families rather than eating things like Domino’s Pizza or Chinese food in front of their TVs at night in an antisocial way.”

One thing is clear from the prospectus the company filed on June 1: Teaching America to cook is an expensive undertaking.

Blue Apron lost $54.8 million dollars in 2016, a 16% greater loss than the previous year. It booked $795 million in net revenue, compared to $341 million in 2015, growth of 133%.

Food, packaging, and shipping (“cost of goods sold”) made up the bulk of Blue Apron’s expenses but marketing also weighed in heavily. The company poured $144 million into marketing in 2016 and $60.6 million in the first quarter of 2017 alone. Blue Apron says in the filing that its growth “will depend in part on our ability to cost-effectively launch marketing campaigns that attract and retain customers and successfully promote awareness of our brand.”

Like many startups in the meal-kit and food-delivery industry, Blue Apron spends a lot of money on promotions for its customers. It signs them up using a referral program, direct mail, television, and podcasts (lots of podcasts), among other things. New users typically get hefty discounts on their first order, often using a targeted referral code.

Through its massive marketing spend, Blue Apron has attracted more than 1 million customers. The company grew its customers at a consistent 18% quarter-over-quarter in three of the last four quarters. The business is seasonal: The beginning of the year tends to yield a lot of new growth (perhaps those New Year’s resolutions at work or people cashing in holiday gifts), while signups slow during the summer vacation months and holiday season.

Despite steady customer growth, Blue Apron doesn’t seem to be inspiring its customers to spend more over time. Over the last year, both its average number of orders per customer and the amount spent on those orders declined. Customers were spending an average of $236 per month on the service as of the first quarter of 2017, an 11% decline from the same period a year earlier. Those numbers include all of Blue Apron’s meal deliveries business, as well as sales of wine and kitchen utensils, so they’re not perfect indicators of the core business.